Help With Past-Due Bills

Past-due bills could cause a strain on your financial fitness. While it may become annoying to see that your mailbox and answering machine are filled with notices from creditors, it might be a sign for you to obtain some help. Most past-due bills that lack your attention will continue to grow. However, a prompt follow up with your creditors may present options to help resolve your arrearage.

Rising Debt

Past-due bills may increase above your minimum payment due to late fees, interest or items such as returned check fees. An account that requires a $20 minimum payment could incur late fees above $20, interest charges on past due balances that accrue above $10 per month, and up to $38 for checks that are returned by your bank for insufficient funds. Debts that spiral out of control might become difficult to manage or resolve, particularly when your balances grow faster than your monthly payments.

Communication

Proactive attempts to discuss your past-due bills may minimize your debt from collections activity, judgments or legal fees. Write a letter to each of your creditors explaining your current hardship which caused your bills to become past due. You might decide to call each of your creditors to discuss the status of your past-due bills for a faster response. Communicating with your creditors may signify your willingness to work toward clearing past-due debts.

Payment Arrangements

Your creditor may respond to your request for help with a payment plan. Some creditors might offer flexible payment arrangements that are designed to get your account back on track. A payment plan could change your current due dates on certain debts and minimize the late fees on some of your past-due bills. Asking your creditors for help is an important step toward resolving past-due bills.

Debt Counseling

A debt counselor may help you obtain relief from creditors who pursue you in attempts to collect past-due debts. If your debt has reached an unmanageable level, you might obtain help from a nonprofit agency that provides guidance for consumers. Some debt counselors will charge fees based on various service levels. You should verify that a debt counseling company is in good standing with organizations such as the Better Business Bureau prior to seeking help with your bills. A debt counselor might use her experience to negotiate a more reasonable method for repaying your past-due bills.

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How to Write an Investment Summary Letter

People who invest money are hoping to make a profit for short- or long-term goals. Short-term goals include saving for a used car or a family vacation. Long-term goals include saving for retirement or for a college education for children. Savvy investors regularly track their progress on short- and long-term goals. Writing an investment summary letter provides an accurate view of their progress. Investment summary letters also are helpful for informing others who are participating in the same investment, such as members of an investment club. Investment summary letters are straightforward and simple.

Instructions

1

Get statements for all of the investments you intend to cover in the letter. If necessary, request the statements from banks, credit unions, mortgage companies and other financial institutions. Request statements for the past 12 months.

2

Review the statements to analyze the performance or status of the various investments. Make comparisons to the same point a year ago and six months ago. For a savings account, note the amount on deposit a year ago and compare it to the amount on deposit six months ago, along with interest earned during the period. For an investment property, such as a duplex, note the estimated value of the property along and its cash flow status based on rental income and expenses, such as the mortgage.

3

Write the letter. In the first paragraph state that the letter is a summary of current investments. Then provide an overall summary of the investments based on your review of the financial statements. List the cumulative value of the investments 12 months ago, six months ago and currently. Use the second paragraph to explain unusual activity, such as a sudden drop in value of real estate investments because of the economy.

4

Complete the investment summary letter by making individual comments about each investment, based on the records.

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The Consequences of Consolidation for Personal Debt

Personal debt consolidation is a method of combining all debts into a single payment. Methods for debt consolidation include taking out a personal or home equity loan to pay off credit cards and other loans. Several companies, including banks, offer debt consolidation loans. Consolidating debt can be beneficial if a home equity loan is used since the interest can qualify as a tax deduction. However, there are many pitfalls to personal debt consolidation.

Overspending

Debt is sometimes the result of personal overspending habits. Overspending is the result of habitually spending more money than one has, and using credit to pay the overage. Wide availability of credit made overspending easy for many Americans in the early part of the 21st century. Debt consolidation will lower the monthly payment of overall debt, freeing more available monthly income for other purchases. If a borrower does not harness her spending habits following consolidation efforts, she may find herself in greater debt than before the consolidation.

Hidden Fees and Extra Costs

Consolidation loans can be expensive. The loans will have origination fees and other hidden fees that increase the cost of the debt. Some loans require an expensive loan insurance to protect against bankruptcy losses. Consolidation loans may also have a high interest rate that can increase the overall price of the debt.

You'll Pay More In The Long Run

Consolidation loans may lower your monthly payments, but the borrower will end up paying more than he currently owes by the time the loan is repaid. Lower monthly payments are made possible by consolidation loans by stretching the length of time to payback. The additional months of low monthly payments include additional compound interest rates that the borrower would not have paid if she had made the payments on original debt.

Negative Credit Score

Closing accounts and opening consolidation loan accounts can cause FICO scores to decrease. The FICO score measures debt-to-income ratios. By closing current credit accounts and opening up a single line of credit for the consolidation loan, borrowers reduce the amount of credit available to them, which hurts their score.

Collateral Damage

Some consolidation loans require personal collateral for security. If, for any reason, the borrower is unable to make payments on a consolidation loan, and even puts a car or home up for collateral, the bank or loan company can legally seize the home or car. Cars and homes are the only assets some Americans possess. Losing these can leave the borrower with nowhere to live and no way to get to work.

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How to Find Legal Help to Collect a Judgment

Collection of judgments can be a confusing and frustrating experience. Unfortunately, legal aid foundations do not generally accept collections cases. Additionally, the court that issued your judgment can not assist you in collecting your judgment except for issuing orders such as an Order for a Debtors Examination, Writs of Possession, Writs of Execution, Garnishments and Levy Orders. Your best option for locating a collections attorney is by searching the website maintained by Martindale. Read on to learn how to find legal help to collect a judgment.

Instructions

1

Search the Martindale attorney directory online or locate a collections attorney from your local Yellow Page Directory. Enter collections at the Martindale search website. Jot down the contact information for attorneys who frequently handle collections. Any websites maintained by the attorney or his law firm are listed, too.

2

Select one or more attorneys that handle collections cases and make an appointment. At your appointment, be sure to bring all documents relating to your case, judgment and describe any attempts that you have made to locate assets of the debtor. Before hiring a lawyer, you should contact the attorneys representative clients. You can also check to see if the attorney has a disciplinary record by contacting your states bar association.

3

Contact your local Lawyer Referral Service (LRS) for an appointment to talk to an attorney, if you desire. Often, an LRS will charge a nominal consultation fee. In some cases, an LRS may arrange for a free consultation.

4

Sign an agreement with the attorney that you have chosen. You will likely be required to pay an attorneys retainer for his services along with a deposit for anticipated court costs.

5

File documents with the court through the attorney representing you. Often, attorneys will request an Order for Debtors Examination. The court will then order the judgment debtor to attend where you or your attorney can ask the debtor about any and all assets the judgment debtor has in his possession.

6

Collect your award through one or more writs (hopefully).

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Are Medical Bills Considered Consumer Debt?

Medical debt is unsecured debt and is considered consumer debt. The unsecured nature of medical debt makes it similar to credit card debt. No collateral is pledged for medical debt, with the threat of debt lawsuits -- and possible wage or bank garnishment -- the most powerful weapon debt collectors have to collect on unpaid medical bills.

Insurance Woes

People without insurance coverage are the most vulnerable to medical bills. Even routine, non-emergency medical treatment can cost thousands of dollars, with hospital stays or serious treatment costing much more. It is not unusual for some people without insurance to accumulate medical debt exceeding $50,000.

Few Remedies

The options are limited for resolving large medical bills. Bankruptcy, especially Chapter 7 bankruptcy, is the most effective remedy for completely eliminating medical debt. However, all debts have to be included in bankruptcy, making it impossible to file bankruptcy on medical debt alone. Chapter 7 completely eliminates medical debt and other unsecured debt in just a few months. Real estate such as a primary residence can be protected during Chapter 7 through the use of exemptions. An exemption protects an asset from being sold to pay creditors.

Income Limits

Individual states maintain income limits for Chapter 7, making this option difficult for many people to qualify for. People who cannot qualify for Chapter 7 can choose Chapter 13. However, Chapter 13 takes much longer to complete because of court-imposed payment plans of three to five years. During the plan some percentage of your income will be paid to creditors, including holders of the medical debt. The exact length of the payment plan depends on your income, and the medical debt collectors and your other creditors may receive only a small percentage of what is owed to them. At the end of the payment period any remaining medical and other unsecured debt will be eliminated, or discharged.

Debt Settlement

Bankruptcy is effective at eliminating medical debt and other debts, but it is the worst solution for your credit. Bankruptcy remains on your credit report for 10 years, making it difficult to obtain new credit at competitive rates. Another debt management strategy, debt settlement, eliminates medical debt and is less damaging to your credit. Debt settlement allows you to resolve medical bills for less than the full balance, with medical debt collectors willing to accept around half the balance. Unlike bankruptcy, you do not have to include all of your debts in debt settlement. Debt settlement can be self-directed, allowing you to choose which medical debts you wish to negotiate.

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How to Change a Name on Billing Accounts

If you have recently changed your name due to marriage or other reasons, one of the things you should do is update your name with creditors and other billing accounts. Most companies have an easy protocol that will allow you to update your name. Depending on the extent of your name change, you may be required to provide proof of the change.

Instructions

1

Contact the billing company. Generally a telephone number will be listed on your bill. If not, try visiting the company's website to obtain contact information.

2

Advise the company representative that your name needs be updated on the bill. If the update is minor, such as a last name change due to marriage or a name that was previously misspelled, the representative should be able to easily change your name. If you have legally changed your entire name, the company may require you to mail or fax a certified copy of your legal name change.

3

Obtain a reference number from the company representative as your proof that you did call to request the name change.

4

View your next bill to ensure that your name has been updated.

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Consequences of Not Paying a Hospital Bill

If you have an outstanding hospital bill, you're not alone -- medical collections make up half of all collection accounts for unpaid debt, reports MSN Money.



Medical collections for hospital bills and other health care fees are not unusual on credit reports, but over time, the damage they can do to your credit score -- as well as your health and income -- can be substantial.

Damage to Credit

Not paying a hospital bill can be hazardous to your credit. Medical bill delinquencies are routinely reported to credit bureaus and/or turned over to collection agencies, often resulting in a hit to your credit score each time the bill is reported as delinquent. And, as the practice of selling medical debt becomes more prevalent, expect to be reported sooner. MSN Money's Liz Pulliam Weston explains: "an increasing number of for-profit hospitals and even some nonprofits regularly sell their bad debts for two or three cents on the dollar rather than try to collect the money themselves. So-called debt purchasers buy huge portfolios of debt, and one of the first things they do is post the collections on the consumers' credit reports."

The damage done to your credit depends on how many bills you have outstanding and your record of paying bills in the past. If it's one hospital bill, and you have an otherwise good credit report, the damage will not be as bad, but if you rack up several unpaid medical bills, expect your credit score to begin a nosedive.

Loss of Services

If you really like your regular health care providers, paying your bills is a must -- otherwise, they can refuse to see you. While emergency rooms cannot turn patients away, clinics, private practices and even some hospitals can and will refuse to provide services to those whose accounts are in arrears. If you are in the midst of extensive treatments for an ongoing condition, or need regular medical care for a condition, not paying your bill can leave you vulnerable as a result of refusal of services.

Legal Trouble

If you decide not to pay a sizable hospital bill, or have not paid other bills at the same hospital in the past, you may be setting yourself up for legal consequences. Hospitals -- or collection agencies hired by hospitals -- can turn debt over to an attorney who can file a legal claim against you if you do not pay. If the court decides that the hospital or collection agency has a good case, you will be ordered to repay, which can result in garnishment of wages or money you have in the bank.

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The Best Fixed Loans to Pay Off Credit Card Debt

Credit cards may be a convenient source of on-demand financing, but high interest rates, sometimes exceeding 30%, have many cardholders looking for ways to clear outstanding balances. By consolidating high-interest credit card debt under a lower-cost fixed loan, many customers can use loans from home equity, retirement plans and even life insurance to cut credit card costs.

Home Equity

Homeowners who have considerable amounts of credit card debt may find that the easiest and most beneficial way to consolidate the outstanding balance is through a home equity line of credit, or a home equity loan. Because the homeowner's own house is used as collateral to secure the loan, equity loans carry a considerably lower interest rate than credit cards, sometimes as low as 5 to 8 percent. Even better, the small amount of interested racked up by a home equity loan is tax deductable, creating an added cost savings at tax time.

Homeowners who choose to consolidate high-interest credit cards under a home equity loan should use extreme caution in doing so, as the potential does exist for some debt-laden consumers to jeopardize their homes using this method (some borrowers pay off credit cards with a home equity loan, but then run up new balances on the freshly cleaned credit cards). To get the most benefit from a home equity loan, borrowers should cancel existing credit cards after paying them off, perhaps saving one or two, preferably with low limits, for use in emergency situations.

401(k) Loans

Credit card debtors who have a 401(k) retirement plan may find that a 401(k) loan is a preferable method for quickly paying off outstanding credit card debt. Many 401(k) plans allow participants to take a loan of up to 50% of the retirement account balance, payable in monthly installments over a period of up to five years. While loan and repayment options vary, typical interest rates are one or two points above the prime rate, making repayment affordable for most debtors (and, certainly, cheaper than credit card debt). There are certain tax penalties that a borrower may incur when using a 401(k) loan, most obviously the repayment of the loan with after-tax funds. In addition, debtors who borrow against their retirement plans should use caution to ensure that high-rate credit cards are destroyed or accounts closed in order to avoid temptation to incur additional card debt.

Life Insurance Loan

Debtors who have life insurance featuring a cash value may have the option to borrow against their policy. When borrowing against life insurance, the insurance company essentially "fronts" money that would be paid out when the policy-holder passes away, giving the debtor an opportunity to use the money while still alive. While the prospect sounds promising, the advance is a loan and must be repaid with interest; if the borrower should pass away (even if unexpectedly) before the loan is repaid, the outstanding balance and any interest will be deducted from the policy payout. In extreme cases, this situation could render surviving family members unable to pay funeral and burial expenses. Still, the comparatively low interest rates of life insurance loans make them an attractive option to debtors facing high credit card balances.

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What Is a Charge-Off Debt?

A charge-off debt can reek havoc on a debtor's life in many ways. Creditors can charge-off a debtor's account and damage a debtor's credit score for failure to pay. Charge-offs can make it difficult for a debtor to purchase a home or car, to gain personal credit, or even to get a job. Even if a debtor is able to obtain a loan, the loan will be at a higher interest rate, possibly costing the debtor thousands of dollars in interest over the term of the loan.

Facts

Charge-off debt is a term used by creditors to reconcile their accounting balance sheets. When creditors are unable to collect on a debt for a period of time, generally 6 months, they will write off the debt. To the creditor, the write-off is an expected cost of doing business. To the debtor, a charge-off appears on their credit report and lowers credit scores making it difficult to obtain loans.

Significance

Many times, when debtors see that an account was charged off by a creditor, they falsely believe it means the debt no longer exists. The debt does exist, and most times, just changes hands from your original creditor to a debt collection agency. In many instances, the same debt is reported twice: once as a charge-off by the original creditor and again by the debt collector as a collections account. A debtor can request the credit bureaus remove one of the duplicate accounts. The credit bureau will investigate the request and has 30 days to either remove or provide an explanation as to why it cannot be removed.

Time Frame

While original creditors usually attempt to collect payment for 6 months before writing off the debt, the charge-off remains on a debtor's credit report for 7 years. Once the original creditor passes the debt onto a debt collection agency to collect, the debt collector can contact the debtor until the debt is paid. Of course, the collection agency must follow all federal laws when attempting to collect a debt. A copy of the Fair Debt Collection Practices can be found on FTC.gov (see References). A debtor also needs to be aware of the statute of limitations for filing a lawsuit on an unpaid account. In most states, the statute of limitations is between 3 and 6 years, which means the creditor has until the expiration of the statute of limitations to file a lawsuit. Collectors will determine whether an account is worth filing suit depending on the amount owed, whether your state permits garnishment of wages and whether a debtor has adequate assets. Make sure to contact a consumer law attorney to get legal advice on your particular state's statute of limitations.

Effects

A charge-off can cost a debtor a great deal in the way of getting higher interest rates, being turned down for a job or not being able to purchase a home or car or to finance his child's education. In some cases, debtors may be able to obtain a home mortgage under the condition that the debt is paid off. Credit card companies and car lenders may extend credit to the debtor with a charge-off but at a higher interest rate than those with good credit.

Expert Insight

If a debtor chooses to pay off the debt, it is important that the pay-off terms be in writing. Settling the old debt may, in fact, cause harm to a debtor's credit score, so it is best to negotiate with the creditor that if the debt is paid in full, the negative information will be removed.

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Who Can File a Lien on a House?

When you owe someone money, one of the ways that they can collect it is to place a lien on your house. This makes it impossible for you to sell the house without repaying your debt. In some cases, it could result in you being forced to sell your home.

What Is a Property Lien?

A property lien is a type of encumbrance that someone can put on your property when you owe them money. When a lien is placed on the property, you have to repay the debt that is attached to the lien before you can keep any of the money that is generated from the sale. Once a lien is placed on the property, you can have it removed by paying the debt, or you can pay it when you sell the property.

Voluntary Lien

One type of lien that is commonly used is a voluntary lien. With this type of lien, you voluntarily give someone a claim against your property to secure a loan. This is typically the case when someone uses a lien to secure a mortgage. If you do not pay your mortgage payment, the lender can foreclose on the property. This type of lien can also be used for a home-equity loan or a home-equity line of credit.

Creditors

When you owe a creditor money, it could file a lien against your property. A creditor, such as a credit card company or a medical provider could file a lawsuit against you in civil court. Then when it receives a judgment against you, the creditor can use this judgment to file for a lien on your property. The creditor then takes the judgment to the local land records office to file a lien on your property. It can collect money when you sell the property.

Mechanic's Lien

A mechanic's lien is another type of lien that can be used on your property. With a mechanic's lien, a contractor places a lien on your property after working on your house. For example, if a contractor came and installed a new roof for you and you did not pay your bill, the contractor can then file a mechanic's lien against the house. This helps him eventually collect the amount of money that he has tied up in the house.

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Typical Debt for a College Grad

Attending college is expensive and students are often forced to take out loans to cover the cost of tuition. Many students graduate college with a large amount of education debt which is often scheduled for the start of repayment just months after leaving school. The typical debt students graduate college with can affect many areas of life from where they live after graduation to the health of credit ratings.

Student Loan Debt

According to Newsweek's web site, as of 2009 the average college student graduated with over $24,000 in student loan debt. This was a 6 percent increase from the previous year. The size of the debt the average student leaves school with can make it difficult to secure new lines of credit because of the student's lopsided debt-to-income ratio. This could hurt a student's credit score. That, in turn, may hurt his ability to secure certain types of finance jobs that require contact with large volumes of cash.

Credit Card Debt

The workload of college courses can be demanding and many students find it difficult to maintain a part-time job and keep up with school work. This is why many students turn to credit cards to make up for shortfalls in cash and to pay expenses student loans don't cover such as textbooks. According to MSN Money Central, as of January 2009 the average college student graduated with $3,262 in credit card debt. It could take several years to pay down that amount of debt if only the minimum payment amounts are made each month.

Highest Debt by State

Certain locations in the United States show higher average student loan debt than others. This could be attributed to the universities in those particular areas and a higher cost of tuition as well as a higher cost of living. According to Newsweek's web site, as of 2009 students graduating from colleges and universities in the District of Columbia and New Hampshire areas carried the largest average debt with $30,033 and $29,443, respectively.

Lowest College Debt by State

Some states across the country have universities and colleges that offer tuition rates substantially lower than other schools. These are usually state-funded institutions that offer discounted tuition rates to state residents who choose to attend a school in-state rather than leaving the state to attend college. According to Newsweek's website, as of 2009 college graduates in Georgia and Utah carried an average graduation debt of $16,568 and $12,860, respectively. A low amount of total debt puts a graduate in a much better position to begin paying her student loans off and find employment without feeling the anxiety of a massive debt.

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Can a Collection Agency Collect a Debt Upon Death?

Collection agencies can attempt to collect debts after your death. When you die, the assets you leave behind become your estate. Collection agencies can be paid from your estate if there's enough money to cover the debts. If there's not enough money, collection agencies can't collect unless the debt is shared by someone else.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act protects consumers from being mistreated by collection agencies. Collection agencies can't call at odd times and they can't threaten or harass you. The act also protects consumer privacy, even after death. A collection agency can contact immediate family regarding who is responsible for the debt, but can't discuss the nature of the debt with anyone who isn't directly responsible for it. If there is a lawyer representing the estate or other responsible party, the collection agency is required to speak with them and not continue to contact other parties.

Determining Responsibility

Collection agencies can speak to the party responsible for the debt they're attempting to collect. Credit cards and other bills in collections are the responsibility of the estate, and only the estate, if there aren't any co-signers on the account, if the deceased was single or if the deceased was married in a non-community property state. Co-signers are responsible for any debt they co-signed if the debt can't be paid by the estate. Spouses are responsible, even if they didn't co-sign, for any debt accumulated during marriage if they live in a community property state and the estate can't cover the debt. The community property states are: Alaska (if the couple opts for community property), California, New Mexico, Texas, Washington, Wisconsin, Arizona, Idaho, Louisiana and Nevada.

Dealing With Collection Agencies

If you're the responsible party for a debt after the original debtor dies, you may want to speak with the collection agency once to set up a payment plan. If you don't want to communicate by phone, write a letter to the agency and mail it using certified mail. You can ask the agency to stop contacting you by mail, and you can also propose a repayment plan by mail. Don't commit to a repayment plan that's more than you can afford. If a collection agency is harassing or otherwise mistreating you, contact the office of your state attorney general and the Federal Trade Commission to report the agency.

Government Student Loans

Student loans aren't subject to collections after death. Federal government student loans are canceled if the borrower dies. You provide the student loan servicer with a certified copy of the death certificate and, once the servicer receives the copy, the loan is discharged. Private student loan providers aren't required to discharge loans if the borrower dies, but many do. Contact your loan provider for information if you don't know the type of student loan.

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What Can You Do to Enforce a Financial Civil Judgment?

Once a plaintiff prevails in his civil action against a defendant, a court will enter a judgment for the amount of damages awarded. Thereafter, the plaintiff is designated as a judgment creditor and the defendant, a judgment debtor. The principal means by which a judgment creditor can enforce his judgment is to initiate various court approved post-judgment procedures authorized by the jurisdiction in which he resides.

Post Judgment Collection Procedures

Once he obtains a judgment from the court, a judgment creditor can seek satisfaction for the judgment by commencing post-judgment collection procedures authorized by law. In most jurisdictions, the principal methods for enforcing a judgment include attachment, wage garnishment and placing a lien on the judgment debtor's real property.

Execution on The Judgment

In most states, once a creditor has obtained a judgment, he must then request that the court issue an Execution. An Execution is a legal document that bears the official seal of the court that issued the judgment. It contains the dollar amount and date of the judgment and serves as the official document by which a creditor can levy against a debtor's assets or property. A judgment creditor can levy on his execution at any time during the statutory period for which the judgment is effective.

Wage Garnishment

In most jurisdictions, a judgment debtor can apply to the court for a writ of garnishment, an order directing the employer of the judgment debtor to set aside a specified percentage of his weekly wages for the benefit of the judgment creditor. The wage garnishment order continues in effect until the judgment expires. In most states a specified percentage of a debtor's wages, usually 25 percent, are exempt from garnishment, as are public assistance and disability payments.

Attachment

Attachment is a post-judgment procedure whereby a creditor applies to the court for an order to attach the assets in a judgment debtor's bank account.

Lien

A levy or lien placed on the real property of the judgment debtor acts as a cloud on the title of the property and it must be dissolved or satisfied before the property can be sold or transferred to a third party. This is an effective collection technique because the debtor will never be able to sell his property unless the judgment creditor is first paid the judgment amount in full.

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Can You Recover From Tax Debt?

If you owe a substantial tax debt, you may feel like you will never be able to financially recover and restore your credit rating. The IRS, however, is willing to work with consumers to help them settle their tax debts and regain financial freedom. In addition, your credit score may not be as damaged as you think.

Time Frame

Unlike other forms of debt, unpaid tax debts do not have a set credit reporting period. If you pay the debt, however, the credit reporting agencies will remove it from your credit record seven years from the date it was paid.

Benefits

You can request that the IRS grant you a settlement, known as an "offer in compromise" for your outstanding debt and pay less than you actually owe. The IRS will use your financial information to decide on a settlement plan to help you pay off your tax debt.

Considerations

You can request a payment plan from the IRS for your debt. This allows you to satisfy your legal payment obligations over time rather than struggling to secure funds to make a lump sum payment.

Misconceptions

A tax debt will not have the same negative effect on your credit report forever. The older the debt, the less the credit bureaus will take it into consideration when calculating your credit score. Thus your credit score can recover, at least partially, even if the tax debt remains on your report.

Warning

If you choose to ignore your tax debt, the IRS can garnish your wages, put a levy on your bank accounts or place a property lien on your home. These consequences are much harder to bounce back from than working to pay off the amount you owe.

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The Best Way to Get Rid of Debt

Few things stand in the way of financial security more than debt. If left unchecked, it can cripple your credit rating, drain your resources to the breaking point and leave you casting about desperately for any means of recourse. Reducing your debt starts by sizing up the problem and developing a comprehensive strategy for addressing it. It takes discipline and hard work, but with the right amount of patience, it can be done.

Spending Habits

Getting rid of debt starts by eliminating all unnecessary spending. Go through your finances and cut out anything you don't need. Stop eating out and prepare frugal meals at home instead. Avoid going to the mall and don't make any purchases unless they're absolutely necessary. You can further cut your spending by purchasing a calendar and noting when bills are due; that keeps you from paying any late fees. It also helps to create a monthly budget---allocating a certain amount of resources for debt reduction---and then maintaining it until your debt is gone.

Credit Cards

Ideally, you should cancel all of your credit cards and cut them up when trying to reduce debt. If you can't do that, then try to consolidate the debt into a single card. Check to see which one offers the lowest interest rate, then transfer the debt on all the remaining cards to it. When paying off credit card bills, always pay more than you owe each month; don't just pay the minimum required. Develop a schedule for paying off your credit card bills and stick to it. Remember, interest rates on credit cards eat into your future income. The faster you pay them down, the less you'll have to pay on your overall debt.

Loans

You can tap into other sources of income in order to pay down a debt. If you own a home, look into a home equity loan in order to consolidate your various payments. Check your savings account or see if you can liquidate parts of a 401(k) or similar source of equity. If you have additional assets such as a vacation home or a boat, think about selling it; it costs you money to maintain them if you're letting your debt ride rather than liquidating them. Consider speaking to a family member about a loan; if they're able, they can offer you better rates than a bank or credit card company, and the interest goes to someone you care about instead of a giant corporation. If worst comes to worst, consider selling your house, moving into a smaller apartment, or moving to a city with a lower cost of living. The money you free up can then be applied to your debt.

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How to Lower Credit Card Percentages

Credit card interest rates can be very high. In some cases it can be difficult to decipher why an interest rate is so high. Lower interest rates means lower payments; it also means you can pay down your debts faster. In order to get lower interest rates, you need to ask for them and provide evidence that you deserve them.

Instructions

1

Pull a recent copy of your credit report (see Resources). You should also pay for a copy of your FICO score. This three-digit number, between 300 and 850, gives lenders a good snapshot of your total creditworthiness. Excellent scores are above 720 while poor scores are below 600.

2

Look carefully at the payment history for each credit card for which you'd like a lower interest rate. If you've had delinquent payments--especially recent ones--you'll likely not qualify for a lower rate. On the other hand, if your payment history is perfect, you have some leverage.

3

Decide what rate you think you deserve. When you ask for a new rate, you are allowing lenders to look at your payment history--both on their accounts and on your other accounts.

4

Contact all lenders and speak with an account servicing representative. Be direct and ask for the rate for which you think you are qualified. Provide your reasons and offer to fax any documents supporting your claims. Speak with a supervisor if you are denied outright.

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How to Combine Debt Options

Consolidating debt saves money for many burdened with high interest payments and huge debt loads. It can be a method for reducing risk or a strategy to enable taking on even more debt. Credit counseling and debt consolidation companies offer specially tailored loans to combine multiple debts, but debtors have the option of creating their own consolidation plans by taking out personal loans or lines of credit at a lower interest rate than their other debts.

Instructions

1

Contact a non-profit credit counseling service using some of the links located in the resources section. These services offer free counseling and other debt-related services for a nominal fee. These organizations primarily offer advice and education tailored to your situation.

2

Determine your options for financing your high interest debt through conventional loans and lines of credit. Banks offer secured and unsecured personal loans to people with good credit at lower interest rates relative to credit cards. You can transfer the balance of your current credit cards to one with a lower introductory interest rate or one that offers bonuses for balance transfers. Home equity lines of credit and home equity loans can also offer relatively low interest rates to be used for credit consolidation.

3

Explain your credit situation to the lenders where you are trying to get loans from. Demonstrate how consolidating your credit will affect your budget and leave you with more spare income with which to pay back the consolidated loan.

4

Consider contacting a credit consolidation services. These are for-profit businesses chiefly interested in offering loans with fees attached to finance existing debts. They may also offer counseling services for a fee. Read all agreements with such businesses very carefully, as the fees can be high enough to make the consolidation loan uneconomical.

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How to Find Your Credit Score in Canada

Canadian credit scores are held in the databases of one of two companies: Equifax Canada and TransUnion Canada. Borrowing money from any entity will affect your rating at one of these companies, or possibly both. To maintain a high credit rating, it is best to pay your bills on time and not accumulate too much debt. Your credit score is available to you and can be found out fairly quickly.

Instructions

1

Type in the web address of the company you wish to check. For Equifax Canada go to Econsumer.equifax.ca and for TransUnion Canada go to Transunion.ca. (See Resources for links.)

2

Select the option to order your credit score. For TransUnion Canada, select the button "Show me my credit profile." Make sure that the credit score option is checked before clicking on it. For Equifax Canada, select the "Credit Score" order button.

3

Fill out the required information such as name, address, social insurance number and driver's license number. Click "Next."

4

Fill out payment information and submit the form.

5

Answer questions regarding identity. This will ensure the company can confirm your identity. The questions will be based upon accounts you have or other data accumulated by the reporting agency.

6

View your credit information.

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Can I Get a Secured Loan If I Have a Poor Credit Rating?

Secured loans are a type of loan that is backed by the item being purchased in the loan. In the case of a house or car loan, it's a cash amount equal to the loan or some other form of collateral. Secured loans are an alternative to an unsecured loan if you need to make up for a bad credit rating. Not all banks offer secured loan options for those with bad credit ratings, however.

Finance Departments

Talk to the business's finance department if you are buying a car or furniture, or looking for another type of loan backed by real property. Some financing departments have special bad credit loans that will probably cost you more in the end due to higher interest rates, but are not difficult to qualify for. Check for places that welcome bad credit or no credit borrowers, such as rent-to-own establishments and buy-here-pay-here auto lots.

Secured Savings Loans

Save up the loan amount in a savings or bank account over time. Check with your bank to see if it will offer you a loan in the amount of the money in your savings account so you can start to repair your credit history.

Credit Unions

Visit local credit unions and speak with the loan officers directly. Credit unions service smaller areas than many banks, and may have bad credit loans available to help out borrowers in that situation. You may also be able to convince the loan officer to offer you a starter loan to establish a credit history, either secured by a certain amount of money or completely unsecured.

CD Secured Loans

Some banks may request that you put money into a CD account instead of a normal savings account when you request a secured loan through the bank. The money in the CD account accumulates interest over time, and when you pay off the loan, you can withdraw the secured amount of money or allow the CD to mature.

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Credit and Debt Relief Solutions

Debt does not open the door to your dreams and desires. Instead, it can cause a nightmarish financial situation that can take several years to eliminate. Credit and debt relief solutions involve more than just making a phone call. You also need discipline, will power, a commitment and the courage to admit you need help. With strategic planning and addressing the issues behind problem spending, you can find a long-lasting solution to your debt.

Calling Credit Card Companies

While credit card companies may seem like the enemy with high interest rates and annual fees, they can be sympathetic to those facing financial hardships. If you are experiencing a loss of income or more debt than your monthly income can cover, you may find it worthwhile to call your credit card companies to see if they offer assistance programs. Many major credit card companies offer lower monthly payments and a reduced interest rate for six months or more.

Budgeting

Budgeting is the process of allocating your monthly income to avoid spending more money than you earn. Create a budget by calculating how much essential items cost, such as housing payments, utility bills, debt payments, insurance, health care and groceries. With the leftover money, assign different amounts to nonessential items, such as eating out for dinner. A wise choice to make with leftover income is to place some of it into a savings account or use it to pay off debt faster. Additionally, do not rely on credit cards to help with any expenses. Pay cash for everything so you can see your debts begin to shrink.

Paying Off Small Debts

Some financial experts may recommend that you tackle your largest debts or those with the highest interest rates first. Dave Ramsey, a financial expert, states that you should focus on eliminating your smallest debts first. By adding more money to your monthly payment, you will pay off your smallest debts faster. Consequently, you will have more money to apply to your larger debts once you eliminate the smaller ones, which will help you find relief sooner.

Credit Counseling

The Federal Trade Commission (FTC) states that those who have trouble creating a budget or managing money should consider credit counseling to find credit and debt relief. A good credit counseling program uses trained and licensed individuals who help clients create a budget, develop money management skills, control spending and eliminate debt. Some credit counseling offer complimentary workshops for clients or the public on topics such as saving money or staying out of debt.

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How to Check for Bad Checks

Bad, or bounced, checks are usually written in two situations: inaccurate checking account management or fraudulent activity. You may not be aware your check has been reported as bad because you are unaware the funds are not available to cover the check due to miscalculations or documenting errors. If you think you may have written a bad check or fear someone has illegally used your account to write bad checks, you can obtain a consumer checking report to view your check writing history.

Instructions

1

Contact the bank that manages your checking account. You can do this in person, online or via telephone. After verifying your identity, you can gain access to your recent checking history and inquire about specific checks. If you are still unsure if you have any issued any bad checks, you will need to check your consumer checking report.

2

Make sure you have all of your personal information at hand. Along with your full name and maiden name if applicable, you will need your addresses from the last five years, social security number, date of birth, and drivers license number and the issuing state.

3

Visit ChexSystems via the Consumer Debit website to request your consumer checking activity report. Consumer Debit allows you to submit your request electronically and your report will be mailed within five business days. You have the right to one free consumer checking report every twelve months.

4

Accept the terms and conditions of using the site to request your consumer checking report. You will also need to verify that you are eighteen years of age or older.

5

Complete all of the necessary personal information correctly. Your current mailing address must be correct in order to receive the checking report. Once the form is submitted, your checking history report will be mailed within five business days.

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How Do I Get Something Removed From My Credit Rating?

When you are given a credit rating, the information used is derived from your credit report and credit history. There are three major credit reporting bureaus, but your credit rating is created by an outside company and not the credit bureaus and is separate from your credit score. To have something removed as a factor in your credit rating, you must have it removed from your credit report. When the rating company examines the report again, it will receive the updated information.

Instructions

1

Get your credit report. You are entitled to one free credit report per year from each of the three main credit bureaus: Experian, Equifax and TransUnion. Go over each one and check for inaccurate information and items where the statute of limitations has expired. Any accurate information cannot be taken off your credit report until its time limit is reached as stated in the Fair Credit Reporting Act.

2

Contact the credit reporting agencies. Each credit reporting agency website has an area dedicated to correcting inaccurate information. You can make a dispute online, via letter or by phone. Try online first and if nothing is done after a month, try by phone and letter. Your credit rating will not change until the items are off the report.

3

Create documentation. If the credit reporting agency does not comply in a timely manner, begin documenting your calls and correspondence and saving any mail or e-mails you get from the credit reporting agency. If the dispute goes to civil court, you will then need this information to show your attempts to settle your dispute.

4

Contact a lawyer. The last resort is to contact a lawyer who specializes in consumer law and ask about forcing the credit bureaus to remove the item from your history. If they refuse or if nothing is ever done, you have the right to sue the credit reporting agency to have the item removed as well as any financial damages that might be awarded to you. You can find a lawyer through your local American Bar Association.

5

Call the credit rating agency. Once the item has been removed, contact the agency that issued your credit rating, and not the credit bureau, and let them know of the change to your credit history and ask them to re-evaluate your credit rating. It might take a month or so for the changes to take effect, but if your credit report has changed significantly, then you should notice a change in your credit rating.

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Bills That Are Reported to Credit Bureaus

Almost all monthly billing accounts will show up on your credit report. This includes monthly payments for utilities, credit cards and personal loans. There are also several other types of bills, such as those for medical services, that you may not think apply to your credit score but can in fact have a negative impact if you don't pay them in a timely manner.

Credit Card Bills

Credit card companies report your payment status to at least one of the three major credit reporting bureaus. Many card companies report to all three. This can, of course, be beneficial as long as you pay your credit card bills on time. Credit card companies have the right to report even one late payment on any account. Once reported, a delinquent payment remains on your credit report for at least seven years.

Utility Bills

Utilities, such as telephone and electric companies, may not report timely payments made on accounts to credit bureaus but will not hesitate to turn defaulted accounts or bad debts over to collection agencies, who will report your delinquency to major credit reporting bureaus. It's important to work out a payment arraignment with utilities to avoid collections proceedings, as this could affect your ability to secure utilities cheaply in the future.

Medical Bills

Medical bills can show up on your credit report in the event your health insurance refuses to pay a claim or is slow in paying out a properly filed claim. These bills are often large and can significantly affect your credit report in a negative way, according to Legal Match's website. It is important to be aggressive in ensuring you are properly billed for medical services performed and that your insurance company pays filed claims in accordance with your policy.

Parking Tickets

That's right--all those parking tickets can show up on your credit report and make it harder for you to secure a better interest rate on a loan, according to MSN Money. These debts won't go to collections and you may never be contacted about paying them other than being picked up on an outstanding bench warrant when you're pulled over for speeding. Paying these debts on time is perhaps more important than others because these bills could cause legal trouble.

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Debt Collection Statute of Limitations in Texas

If you are living in Texas and are contacted by a creditor or collection agency about an old debt, check whether the debt is within the statute of limitations. Most debts have a statute of limitation of four years: If a creditor sues you for a debt that is out of statute, you can ask the judge to dismiss the case. If a debt is no longer under the statute of limitations, creditors will often still try and persuade you to pay.

Open Accounts

An open account is a debt in which a borrower is given an open line of credit that she can then draw upon as she needs or desires. In many states, credit cards are considered to be open account debts. According to Texas Civil Statute Sec. 16.004, the statute of limitations on open accounts is four years.

Written Contracts

The statute of limitations on enforcing written contracts is four years in Texas. While there is some controversy over whether credit cards are considered to be "written contract" debts, in Texas, the statute of limitations on both written contracts and open accounts is the same.

Judgments

In Texas, the statute of limitations on collecting a judgment is 10 years, and a judge can renew the judgment if your creditor requests it. Your creditor can continue to seize your assets, as permitted by law, during this time.

Collection Agencies

In his article, "Third Party Debt Collectors: Know Your Rights " (available on the Texas Attorney General's website) Greg Abbott notes that even if the statute of limitations has expired, there is nothing in the law that prevents your creditor from trying to collect the debt from you. Your creditor may still contact you about the debt, as may a third-party collection agency. If the collection agency or creditor tries to sue you, you can ask the court to dismiss the case because the debt is past the statute of limitations. You are also entitled, under the federal Fair Debt Collection Practices Act (FDCPA), to send a letter (via certified mail, return receipt requested) asking the collection agency or creditor to not contact you again. According to the FDCPA, after the agency or creditor receives the letter, they may only contact you once more to let you know if they plan to take further action.

Credit Reports

The statute of limitations in Texas applies only to the ability of your creditor to sue you in court for the debt: Your credit report is another matter. Your creditor can continue to report your debt to the credit bureaus for seven years after the date you defaulted on the debt.

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Debt Help in the United States

A financial crisis can occur at any time over the course of a person's life. Knowing what to do or where to turn for help can be challenging, especially as the crisis becomes overwhelming. However, mounting debt is a challenge that can be overcome --- people just need to assess their situations and decide what solutions may work best for them.

Debt Relief

Credit counseling agencies can help people assess their financial situation and begin to take charge of their debt problems. These organizations have certified counselors trained in consumer debt and financial management. Many of these organizations are nonprofits, but their services are not always free. People should check to see if universities, credit unions, or housing authorities in their areas offer credit counseling programs.

Debt Management Plans

If a person has too much debt or has problems with making consistent payments, credit counselors may suggest a debt management plan. The credit counseling agency works with the person's creditors to come up with a payment schedule. The debtor sends payments to the agency, which then disburses the money to the creditors. These plans may take four years or more to complete, and sometimes creditors will offer concessions. The debtor should check with her credit counseling agency and creditors to see what concessions may be available and plan completion time.

Bankruptcy

Personal bankruptcy is a debt solution of last resort. It involves a court order that discharges the person's debt. The two types of personal bankruptcy are Chapter 7 and Chapter 13. Both are filed in federal bankruptcy court. A Chapter 7 bankruptcy is a straightforward filing that liquidates all nonexempt assets. Nonexempt assets can include cars, work-related items and some basic household items. In a Chapter 13 bankruptcy the court approves a repayment plan for people with a steady income of up to five years to pay off debt instead of liquidating assets. A bankruptcy stays on a credit report for 10 years and cannot be used to discharge student loan debt.

Debt Consolidation and Debt Settlement

People can consolidate their debts by taking out a second mortgage or a home equity line of credit. While this may offer some tax advantages, if the borrower is late on his payments or can't make them, he may lose his home. Debt settlement companies offer to help people negotiate partial payments to creditors. There are no guarantees that the services they offer are legitimate or that the creditors will accept partial payment. Also, any amount of debt forgiven may be seen by the IRS as taxable income. Do your research when considering debt settlement.

Self-Help

There are things people can do to help themselves. A budget tracks money people bring in as well as the money they spend. This can help in creating a plan to pay down debts. There are books and computer software programs that can help budget planning and paying down debt. People can also contact their creditors before their accounts are turned over to debt collectors and try to work out a modified payment plan.

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How Much Can I Save With Loan Consolidation?

How much you can save with loan consolidation depends on many factors, including how much you owe, what interest rate you're paying, how many more payments you must make on existing loans and the terms of a consolidation loan. While some debt consolidation companies make amazing promises about savings, you can use a debt consolidation calculator to determine the numbers before choosing a consolidation plan.

Debt Consolidation Calculators

Bankrate, MSN Money and Free Online Calculator Use all provide free online calculators to help you figure out your debt consolidation options. Enter your debts, interest rates, and number of payments to calculate the amount you will pay in interest over time. Enter your consolidated payment, interest rates and any fees associated with the consolidation. The calculator can show how much you can save or how much extra you will spend. You can tweak the numbers to figure out what kind of debt consolidation arrangement will save you money.

Home Equity Loan

One common vehicle for consolidating debt is to take out a loan against the equity in your home. Your home's equity is equal to the current market value of your home minus the remaining principal balance on the mortgage. As of April 2011, home equity loan interest ranged from about 5 percent to 7.5 percent, depending on your credit rating. That's significantly lower than some credit card accounts, which may have interest rates from 10 percent to more than 20 percent. If you were paying 16.99 percent interest on $20,000 in debt and you were paying $600 a month, you could save more than $3,000 by getting a 6 percent home equity loan for that amount. Your payments would drop by $130 a month.

Credit Card Consolidation

Depending on how good your credit is, you might be able to get a low interest rate on a credit card. Some cards offer zero percent interest for a promotional period of up to two years for people with excellent credit. Taking the same $20,000 debt at 16.99 percent interest and transferring it to a zero percent interest card, you would save more than $7,000 in interest if you receive a 24-month interest-free offer and pay the debt off before the promotional rate expires. Your monthly payment would rise by about $200, however, and you would have to pay a balance transfer fee, which typically is about 3 percent, or $600.

Personal Loan

As of April 2011, the Federal Reserve Board reported average interest rates on non-revolving personal loans at 11 percent. Consequently, if you took out a 24-month, 11-percent personal loan from a bank to pay off your $20,000, you would pay $300 more a month but would ultimately save about $4,700 in interest. The cost of acquiring the loan should be included when determining the amount saved, however.

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Credit Card Settlement Effects on a Credit Score

When credit card accounts are delinquent, debtors may have the option to reach settlements with their credit card companies for less than the amount due. The effect such action has on a credit score is generally negative, but varies from creditor to creditor.

Considerations

Any notations on a credit report that indicate a creditor took a loss on an outstanding debt is viewed as a negative item. Barry Paperno, chief operations officer at FICO, the company that provides credit scores, advises that settlements are viewed on par with repossessions and bankruptcies when computing a credit score.

Time Frame

Terminology varies, but creditors note in specific terms that a credit account with them is closed but was settled for less than the amount due. Future potential creditors can read this on a credit history as long as these accounts remain on the credit report--usually 7 years, or 10 in the case of bankruptcies.

Misconceptions

Just because a creditor has agreed to a settlement, the negative history with that creditor does not go away once the account is closed. Notes are added to the report indicating a zero balance and account closure, but all negative history still remains on the report.

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Help for Debt Relief & Bankruptcy

There are many options available to reduce or eliminate your debt and get your credit rating back on track. Much depends on the amount of your debt, type of debt (secured versus unsecured), the number of creditors you owe and your financial situation. Bankruptcy may be a last resort or an option better than, say, debt settlement plans, but you should explore all possibilities before deciding on a course of action. Hiring a bankruptcy attorney or a financial attorney to help you navigate any re-payment or consolidation plan might be a good investment.

Self-Negotiation

Get free copies of your credit scores from the three major credit-reporting companies (Equifax, Experian and TransUnion). You need to know who you owe, how much you owe, and compare secured debt (such as home mortgages) against unsecured debt like credit cards. If you've got the stomach for it, you should start by contacting your creditors --- or collection agencies --- directly to negotiate debt settlement plans. You may be able to negotiate principal amounts, interest rates, and fees and penalties. You have to develop a strategy for paying on large debts, old debts and high-interest debts. You may be able to offer as little as 25 percent of principle owed on debts three years and older.

Credit Counseling

Non-profit credit counseling firms, most working under the banner of Consumer Credit Counseling Services, can help you develop a plan for debt settlement, debt consolidation or another strategy to reduce and eliminate debt. Modest fees are based on your income and available resources, and services include helping you develop a realistic budget. Make sure your credit counselor is certified, get all promises and DMP (debt management plan) criteria in writing and beware of counselor promises of instant credit history improvement or immediate cessation of harassing creditor phone calls. DMPs require you to pay into an account that the credit counselors access in order to pay your debts.

Debt Settlement

Debt settlement may be the answer if you have available income after accounting for your monthly bills --- rent or mortgage, utility bills and food and clothing allowances. If you don't own a home, debt consolidation isn't really an option, so settlement may be your only recourse short of bankruptcy. You also need to have a minimum amount of debt for debt settlement companies to assume your case. Company requirements vary, but $5,000 is a minimum threshold for most, with $7,500 being common. Debt settlements offer immediate relief through one or a combination of factors. Some debts may be wiped off your record through lump-sum payments. Others may be negotiated down to a lower principle payment or with a lower interest rate. Debt settlement has a negative effect on your credit score, much like a bankruptcy. Debt settlement resembles a Chapter 7 bankruptcy, while debt consolidation is more akin to a Chapter 13 filing. (See References 4) There also may be IRS implications.

Debt Consolidation

Debt consolidation usually results in a lower interest rate than your combined rates on outstanding debt, and the bills normally are rolled into a single monthly payment. You need collateral, such as a home, for a consolidation loan, but the prospect of a single monthly payment and a reduction in creditor phone calls is appealing to those who can qualify for a consolidation loan. Consolidations have less of a negative impact on your credit score, but you also should keep abreast of whatever company you hire to ensure that payments are being made on your bills in your name. You also can deduct the interest of consolidation loans. Check with the Better Business Bureau for ratings of any debt settlement or consolidation firms you're considering.

Bankruptcy

Chapter 7 or Chapter 13 bankruptcy may be an option. If you have a relatively low income, few assets and a high level of unsecured debt, such as credit cards, Chapter 7 may be for you. Your debt is eliminated almost immediately, although your credit score takes a hard hit. But you can begin re-building your score and re-establishing good credit immediately. Chapter 13 bankruptcy is for people with steady income who own assets --- usually a home --- that they want to save. Payment plans are submitted to bankruptcy courts for approval and, based on your income in relation to your state's median family income, a re-payment plan of three to five years will be approved. You have time to pay off creditors, eliminate some debts, and protect most of your assets, including homes, vehicles, most pension and retirement plans, and personal belongings.

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What to Do if You're Being Sued by a Credit Card Company in Small Claims Court

If you have credit card bills and are late making the payments, the credit card companies will begin collection actions. The companies have been known to call at various times during the day and night, asking you to pay the past due payments. Eventually, the collectors may step up their efforts, and you could end up in small claims court being sued for the amount of the debt.

Determine if You are Really Being Sued

It is against the law for a creditor to threaten legal action when it does not intend to sue, but it still happens. Many collectors send letters that may look like a court summons, but really are nothing more than collection letters. A court summons will have the name and address of the court that you are supposed to appear in, and also the date that you are supposed to appear. Call the court to verify that you have a real summons and court date. Also, most courts require a sheriff or other officer to hand you the summons in person.

Respond

You must file a response to the lawsuit in writing at the court where the creditor has filed the suit. If you do not believe that you owe the bill, or the balance is wrong, you need to include that information in your response. You may also file a general response saying that you dispute the lawsuit. Filing a response preserves your rights to defend the lawsuit and helps to protect you from a default judgement against you, where the creditor wins automatically.

Prepare and Negotiate

If you do not owe the debt, be prepared to show proof as to why not, even though it is the creditor's job to prove you owe the debt. The stronger you can make your case, the better. If you owe the debt legitimately, it is a good time to negotiate with the creditor. It may be willing to start accepting payments again, or the creditor might settle the debt in full for a percentage of the original amount. Settlements generally must be paid in cash, so do your best to put cash together and take care of the debt before the court hearing. Always get any settlement agreements in writing.

Consult a Bankruptcy Attorney

If you are not able to settle the debt, and it is legitimately your debt, the creditor will probably win the lawsuit and receive a judgment against you. After that, depending on the laws of your state, the court may issue an order allowing the collector to garnish your wages, possibly taking up to 25 percent of your salary to satisfy the judgment. This could leave you unable to pay your living expenses. At this point, bankruptcy may be an option for you to stop the collector's lawsuit and any other collections actions against you.

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What to do in the Event of Identity Theft

The Federal Trade Commission estimates that more than 9 million people in the United States are victimized by identity theft each year, and the cost to recover your identity can run into the thousands of dollars and take years to complete. It is important to know what to do when you first find out your identity has been stolen.

Immediate Action

When you find out that your identity is stolen, you should immediately call all three credit reporting agencies to put a red flag on your credit account, according to the nonprofit consumer fraud resource website Fraudaid.com (see Resources). A credit red flag lasts seven years, and it will mean that every time someone tries to open a credit account in your name, you will have to give approval by phone. This also will apply to any accounts you attempt to open in your own name. You will also want to contact immediately the Social Security Administration. It will put a flag on your Social Security number that will track all activity associated with that number to try and find the person that stole your identity.

Financial Institutions

Keep a list of all of your credit card companies and their customer service numbers somewhere in your home. Do not put your account numbers on these lists in case someone steals it. If you have such a list, you can refer to it to warn every one of your creditors that your identity has been stolen. This should also be done by phone and it should be done quickly. If you have the opportunity, go to your main financial institution in person to have the situation noted and sign any documents they need you to sign.

Long-Term Actions

Monitor every piece of credit you have by watching your statements when they come in the mail, and stay in touch with all of your creditors and the credit reporting agencies to start the process of reclaiming your identity. Keep detailed records of everything that happens regarding your Social Security number and credit accounts, and you might also want to retain the services of an attorney who is experienced in helping people reclaim their identity.

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Federal Credit Protection Act

Consumers are protected under a series of credit protection acts to help mitigate unethical lending practices. The Federal Credit Protection Act, also known as the Consumer Credit Protection Act, encompasses these acts and sets standards for the credit card and lending industries. Consumers should learn their rights to better navigate disputes with creditors and ensure they are treated fairly.

Equal Credit Opportunity Act

Consumers are protected from discrimination under the Equal Credit Opportunity Act of 1974. This federal law "prohibits discrimination in credit transactions on the basis of certain personal characteristics, such as race, color, religion, national origin, sex, marital status or age," explains the Federal Reserve bank website. Creditors are also prevented from denying a credit application because of a client's economic hardship. For example, whether a consumer receives public assistance cannot be a consideration on a credit application.

Fair Credit Billing Act

Not all information reported on your monthly bills is correct. The Fair Credit Billing Act of 1974 requires that a credit card company immediately fix any error on your bills without penalty to your credit score. This includes crediting your bill when charges have been incorrectly applied. It also allows you to dispute any billing errors on your credit card statements or refuse payment for any damaged goods.

Fair Credit Reporting Act

Credit bureaus update your credit score each month based on information received from creditors. Occasionally, false information is reported that can cause your score to be negatively impacted. The credit bureaus have a responsibility through the Fair Credit Reporting Act of 1970 to remove inaccurate or misleading information from your credit report. Under this law, consumers have a right to see all information contained in their credit files and can request corrections to errors.

Truth in Lending Act

According to the Federal Reserve Bank, the Truth in Lending Act requires that lenders use standardized procedures for calculating the cost of credit and for communicating credit terms so you can tell how much it will cost to borrow money. This act also limits your liability to $50 in the event your credit account is compromised due to identity theft or unauthorized charges or if your credit card is lost. Credit card companies also are prevented from issuing consumers credit cards in the mail as a form of solicitation.

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How Successful Are Debt Management Programs?

Consumers can enroll in debt management programs through credit counseling agencies if they're unable to pay their bills or work out repayment agreements with their creditors. Debt management program participants deposit money each month with their credit counseling agency, which uses the deposits to pay participants' creditors. Still, some people may not get the debt relief they wanted even after they enroll in a debt management program.

Creditors

People who are deep in debt may discover that a debt-management program is no more affordable than paying their regular bills. Credit counselors work with their debt management clients' creditors to reduce what their clients owe. Creditors may be willing to offer some concessions to reduce what's owed, but that doesn't mean the reduced amounts will be affordable for clients. As a result, some people fail to complete their debt management programs because their reduced payouts to creditors are still too high for them to sustain while paying their other expenses.

Success Rates

An MSN Money article notes statistics from the National Foundation for Credit Counseling that indicate how many of the 3.2 million people who contacted the NFCC in 2008 completed their debt management programs. The article titled "Why Credit Counseling Often Fails" says one-third of the clients enrolled in the program, but about 45 percent of them dropped out. The article also says another third of the people who contacted the NFCC in 2008 had too much debt or insufficient incomes for counselors to assist them through a debt management program.

Fees

Credit counseling agencies get some of their financial support from creditors who give them a portion of the money collected from clients to pay their debts. However, many counseling agencies also charge their clients fees. Your success in a debt management plan is partly linked to whether you can pay the total cost of fees an agency charges, especially if you're already on a tight budget. A CNN Money article titled "Click Here to be Debt-Free" says monthly service fees for debt-management programs can be as high as $50.

Considerations

Your credit score probably will drop after you enroll in a debt-management program. That's partly because creditors usually close customers' accounts after they begin participating in a debt management program. However, people who have fallen behind on paying their bills already have damaged credit ratings. Furthermore, debt management plans can help some people avoid bankruptcy. It will take time to build a good credit rating after enrolling in a debt management program. Program participants may be able to get new credit cards and loans at some point, but they won't get the best terms or low interest rates until they raise their credit scores.

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Tips on How to Get Rid of Debt

For most people, getting rid of debt can be done if you understand your real debt, create a schedule and stay committed. While starting the process can feel overwhelming at first, the benefits you will receive from creating financial stability far exceeds the negatives.

Budget Planning

Finance specialist Dave Ramsey says, "When you see that a budget is just spending your money with intention, you'll actually experience more freedom than before. Many people say they found even more money when they created a realistic budget and stuck with it."

Budget planning is the blueprint behind any debt-reduction strategy. To get a realistic view of how much money is both spent and earned in a given month, you must create a budget. Each monthly cost must be itemized and documented to give you the full scope of expenditures. This includes food when dining out, entertainment spending for movies and such, gas for the car, and any other miscellaneous costs.

One of the most effective ways to make this happen is using the program Microsoft Excel. Virtually every computer that uses Windows as an operating system has Excel. If you don't have Windows you can download "open office" for free and perform many of the same tasks. You want to select a column and write each expense with clarity in a separate cell. Go all the way down the page for as many as you need. Then create a row of cells on top that holds a separate month in each cell. This will allow you to track your monthly expenses on a single spreadsheet, and you can compare costs on a monthly basis.

The first time you set this up, it will take a little bit of time, but once you have the format designed, it will only take a few minutes to input the data and keep it updated regularly. This must become a habit every month if you want to accomplish your goal of understanding and reducing debt.

Payment Prioritizing

Prioritizing is the process of obtaining the outstanding balance of all credit cards, personal loans, car loans, and home loans in a list from least amount owed to the largest amount. If there is any balance greater than zero, place it on this list. This is your budget "snowball," as coined by Ramsey.

The theory is to pay off the item with the lowest balance first to provide momentum. Small successes will lead to larger successes. When you are working hard to pay off debt but never feel the gratification of paying off a complete item, it can be easy to give up. You need to feel accomplishment to continue the process.

The strategy is to only pay the minimum amount to all items except for the one with the lowest current balance. Pay all extra funds to this debt until it is paid off, and then move to the next item on the list. Add the full amount you paid each month for the first item plus the "extra" amount you were paying. This will allow a faster payoff time period of the second item. Continue this payment method each month until all debts are paid. The payoff time period for each item reduces rapidly as you pay off item after item.

Commitment

While it's helpful to understand how to reduce debt, the real key is your level of commitment. Reducing debt is a process that will take time to make happen unless there is an increase in money earned. You must stick with the strategy each month and fight the urge to add to your already existing debt by purchasing new things. The level to which you remain consistent in your debt reduction quest will determine how successful it is.

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Statute of Limitations of the Debtor-Creditor Law for Fraudulent Conveyance in New York

When someone files for bankruptcy or seeks other forms of debtor protection, they may be tempted to transfer property to a friend or close relative to prevent creditors from liquidating that property. Such a transaction is known as a fraudulent conveyance, and creditors can take the relevant individuals to court to negate such transactions. In New York, as with most states, there is a statute of limitations on the time within such a court case may be commenced.

Statute of Limitations

A statute of limitations is a time period within which a legal action must be pursued. After the statute of limitations period has expired, the relevant action generally may not be pursued. Statute of limitations are put in place to ensure certainty and finality in everyday life. It is deemed socially undesirable for a cause of action to be brought over a transaction or occurrence that happened decades before the legal remedy is sought. Statutes of limitations in New York may be anywhere from 1 to 10 years.

Tolling of the Statute of Limitations

The statute of limitations does not necessarily run from the time at which the underlying transaction or occurrence takes place. Particularly when fraud is involved, statutes of limitations often do not run until the fraud was discovered or should have been discovered as opposed to when the fraud actually took place.

Fraudulent Conveyance

In debtor/creditor situations, fraudulent conveyance refers to situations in which property was conveyed by a debtor with the intent to defraud a creditor. For example, a debtor might sell his expensive vacation home to a close relative for a fraction of its true value to avoid having the property liquidated by creditors.

Statute of Limitations for Fraudulent Conveyance

In New York, the statute of limitations for filing a fraudulent conveyance action is six years after the time at which the transfer was made. This means that the statutory period begins to run immediately after the conveyance as opposed to at some later event, such as when the fraud was discovered.

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Advantages & Disadvantages of Settling Credit Card Debt

Debt settlement is a process by which you can renegotiate the debt you owe to a creditor and pay the creditor less than the current balance on the account. Debt settlement can give you peace of mind and prevent your account from being charged off or turned over to a collection agency. Anyone can negotiate a debt settlement plan. You do not have to hire someone to do it for you.

While some creditors are more than willing to work with consumers to settle debt, they are not required to. Do not expect your credit card company to welcome your settlement offer. They want you to pay the full balance and will push for that amount.

Negotiation

If the credit card company is willing to settle, it is only because the risk of not being paid at all has become too great. A willing company is open to negotiation. If you have been late on payments in the past, your creditor may be willing to drop your late payment notations from your credit report as part of the settlement agreement. Negotiation is a very frustrating process and may result in you contacting numerous customer service representatives before you find one that is willing to help you. Not all creditors are willing to settle for less than the balance owed.

Credit Rating

By opting to settle your credit card debt rather than ignore it, you save yourself from having a charge-off appear on your credit report. Charge-offs occur when the credit card company writes your credit card debt off as a loss. Charge-offs damage your credit rating but not as much as the derogatory collection agency notation that would hit your credit report not long after the charge-off.

Unfortunately, many creditors sell the remainder of their settlement balances to collection agencies. You can ask that a provision be included in your settlement that this will not occur, but the credit card company does not have to accept any of your terms. After your settlement, your credit report will update that the balance was "settled". This is seen as a negative by lenders and remains on your credit file for seven years.

Communication

Settlement offers are often lost or misplaced by credit card companies. Your settlement payments are then applied to your pre-settlement account balance. If you do not have a copy of your original settlement offer in writing, you have no way to demonstrate to the company that it has made a mistake. If your settlement offer includes an agreement not to sell your debt and it is sold anyway, you can use the documentation to successfully get collection agency notations removed from your credit report.

Peace of Mind

Stress is unhealthy for both you and your family. Perhaps the greatest advantage to settling a credit card debt is that you are ridding yourself of the stress that being in debt can cause. Each debt that you pay off or settle will make you feel a little bit better. Settling a credit card debt may be worth every penny to you for the peace of mind you get from doing so.

Commercial Help

Try to negotiate with your creditors yourself rather than hiring a company to do it for you. Debt settlement companies may promise to handle all the details if you agree to make your payments to them rather than to your creditors. The catch is that they do not make your payments. They allow your accounts to go further and further into default in the hope that the creditor will then be more open to settlement negotiations, according to the office of the Illinois attorney general. In addition, debt settlement companies charge dearly for their services. This places you even deeper in debt.

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How to Avoid Bankruptcy and Pay Off Debt

Bankruptcy may seem like a logical solution when juggling excess debts, especially if you do not have the money to keep up with payments. However, a bankruptcy notation stays on your credit file for ten years and, after a filing, your credit score will plummet. Bankruptcy gives you a fresh start, but if possible, take steps to see if you can pay off the debt yourself and protect your credit.

Instructions

1

Stop hiding from your debt. Learn the extent of your debt problem by grabbing your monthly statements, a calculator and adding the sum total of all your debts.

2

Look at your monthly income. Create a list of monthly expenses such as housing, gas, food, utilities and other recurring monthly payments. Subtract this number from your monthly income. This figure is your extra or disposable income.

3

Take your debt amount and divide this number by your amount of extra income each month. This figure reveals the number of months it'll take to pay off debt if you use all of your extra income to pay down balances. For example, $5000 (debt balance) divided by $300 (extra income) equals 16.6. Therefore, it'll take about 16 to 17 months to pay off a $5000 debt with $300 payments every month.

4

Get lower rates on credit cards. Telephone credit card companies and ask them to reduce your existing interest rate. You pay less interest with a lower interest rate and, once you begin making higher payments, the bulk of your payments go to reducing the principal.

5

Bring in additional income. Getting out of debt and avoiding bankruptcy will involve sacrifices. If you don't have extra income, sacrifice your free time and look for part-time employment after work. Earn an extra $125 a week and you'll create an additional $500 a month.

6

Downsize to avoid bankruptcy. Move into a cheaper apartment. Sell or rent out your home and find a less expensive one. Get rid of your expensive car payment and purchase a cheaper, used car. Stop shopping sprees, dining out and lavish vacations. Use the money saved to get rid of your debts.

7

Use debt management. Get help from a nonprofit debt management firm to avoid bankruptcy and ultimately get rid of your debts. These firms help you get a better rate on credit cards and loans. Plus, they place a freeze or hold on your credit cards to prevent new charges.

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The Definition of a Revolving Line of Credit

Revolving credit, also referred to as open credit or a revolving charge account, is a consumer credit arrangement that allows the borrower to buy goods or secure loans on a continuing basis as long as the outstanding loans do not exceed a specified limit, according to Black's Law Dictionary. The loan principal usually is paid off in monthly installments.

Function

The borrower decides each month whether to pay off the entire balance on a revolving line of credit or carry some of it over to the next month. If any of the balance is carried over, the creditor charges interest, and this accrues as long as the balance goes unpaid. Each line of credit has a maximum limit, and each purchase counts against that maximum. You maintain access to your credit line by remaining in good standing with the creditor.

Benefits

Consumers can use revolving credit accounts to buy anything they'd like as long as they don't exceed their credit limit. This is particularly useful for making large purchases because these can be paid for in smaller increments instead of in a lump sum upfront. Also, using a revolving credit account for several small purchases and paying them off on time is a good way to build up good credit for major purchases, such as a house or a car.

Considerations

A revolving credit account is a useful financial tool as long as you can make the monthly payments. However, a job loss or other financial issue can cause problems. Also, you pay more when using credit than when paying with cash because of the interest fee, so the Federal Trade Commission advises consumers to calculate the true cost of an item, including interest, before charging it.

Process

Generally, it is not difficult to get approved for a revolving credit account if you have a good credit history. The procedure often is as simple as submitting an application and proof of income to the creditor, and credit card companies occasionally send applications to potential borrowers through the mail. The FTC recommends shopping around when opening a credit account because fees and interest rates can vary greatly by creditor and to read any fine print on a credit application.

Types

Credit cards and home-equity lines of credit (HELOCs) are the two primary types of revolving credit. While any consumer with good credit typically is able to get a credit card, only those who own their homes and have equity in them can obtain a home-equity line of credit. Interest rates for HELOCs generally are lower than those for credit card because the homes are used as collateral, making them secured loans.

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